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Ken Fields
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Life long investor, entrepreneur and business development consultant. Investment Style: Short term event driven trading & long term buy and hold. Real estate developer and owner of diverse portfolio of properties which have included - affordable housing, office buildings, The Creek South... More
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  • Solar Securitization Is A Greentech Game Changer  0 comments
    Jan 20, 2014 11:30 AM | about stocks: RGSE, SCTY

    The past couple of weeks has seen a couple of interesting developments in the renewable energy space, with two companies in particular that I have followed for some time, Real Goods Solar (RSOL) and SolarCity (NASDAQ:SCTY).

    Real Goods Solar completed is acquisition of Mercury Solar, which will give the company a overall larger footprint in the solar installation business, specifically on the East Coast where Mercury is based with eight regional offices. Real Goods also announced projects in Vermont and Massachusetts in partnership with Green Lantern Capital and Blue Wave Capital respectively.

    SolarCity announced that it would now be selling debt direct to retail investors through it's acquisition of Common Assets, LLC - SolarCity became the first company to securitize roof top solar assets with a debt offering of $54.23 million at 4.8% interest maturing December 2026.

    For those who know the solar industry well enough, securitization has been the obvious next step in the evolution of Greentech.

    My "ah ha" moment came a few years ago after I had read Jacobson & Delucci's write up in Scientific American: A Path To Sustainable Energy By 2030 - I will not go into detail attempting to summarize their efforts, the original article can be read here at The Stanford website. Their purpose to the study was to show that it is well within our global reach to power the planet with 100% renewable energy by 2030 - the price tag for this endeavor was estimated to be about $100 trillion. Reading through their numbers and having a basic education on solar and wind install costs, then extrapolating to a global scale, it would be hard to argue that their estimate is that far off.

    Can We Afford It

    Where are we going to find $100 Trillion - it sounds like an astronomical number, but on a global scale and over the course of 20 years how feasible is it? Basically over a 20 year period the planet is going to have to spend $5 trillion a year.

    In 2012 Global GDP was somewhere between $71 trillion (nominal GDP) and $85 trillion (NYSE:PPP). Using the lower more conservative number, $5 trillion represents only about 7%, a relatively low and palatable percentage. For comparisons sake, by doing a quick google search for "global expenditure on energy" we'll discover that global the planet already spends about 8% of it's GDP on energy.

    While hardly a detailed analysis on a absolute apples to apples basis, the two numbers - percentage we need to spend and percentage we already spend are close enough that we can make the leap to say, we do not need to find the money to convert the planet to renewables, we're already spending it. The challenge becomes how do we swap one form of energy (fossil fuels) for another (renewables) - and the most obvious answer is by financing it. Buy it, install it, wrap it up, re-sell it - lather rinse repeat, until we hit the $100 trillion dollar mark.

    Will We See 100% Renewable Energy In Our Lifetime

    If you're wondering whether or not we will seen a planet powered by 100% renewable energy within our lifetime, one need look no further than The Magic 8-Ball, which has repeatedly replied "Signs Point To Yes" - the Wall Street money machine is perpetually looking for ways to make more money charging more fees, if you think the mortgage and asset backed securitization market was a feeding frenzy, with only a couple trillion dollars to wrap and repackage, it will be put to shame by the shear enormity of securitizing renewables - $5 trillion a year, let the games begin - and since Wall Street loves their acronyms, I vote for GEO's (Green Energy Obligations).

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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